The Market of Insurance Services in Ukraine

Unlike the bulk of other sectors of the economy, the market of insurance services of Ukraine is in the state of swift development. The tendency towards rapid growth of insurance services rendered by domestic insurers is observed during the recent years despite the fact that the specific weight of insurance in the gross domestic product still remains small and is smaller than that in developed countries.

The insurance market of Ukraine, on the whole, is competitive and is characterized by the existence of the large number of participants. In 1996, 369 insurance organizations, in fact, operated and were accountable to the State Committee of Ukraine on Supervision over Insurance Activities. As of December 1, 1997, insurance companies having been reregistered in accordance with the requirements of new legislation, the number of the Ukrainian insurers reduced to 212. The decrease in the number of the participants in the market was associated, on the whole, with the fact that small insurance companies could not become, to a full extent, guarantors for ensuring efficient insurance protection of insurants and that those companies had rather limited financial potentialities. Thus the reregistration of insurance companies, that was carried out by the State Committee of Ukraine on Supervision over Insurance Activities, favored the increase in their competitiveness.

Life insurance, other types of personal insurance, property insurance, and liability insurance are the basic segments of the insurance market. At the same time, the share of voluntary types of insurance in the total amount of insurance fees is equal to 75% and that of compulsory fees is equal to 25%. Significant changes in the structure of the insurance market of Ukraine took place during the last three years. Voluntary property insurance, liability insurance, and non-state compulsory insurance are characterized by the existence of extremely high rates of growth parallel with the significant decrease in the volume of life insurance and the nearly unchanged volume of state compulsory insurance. Just those segments of the insurance market are the most attractive and fierce competition takes place just on those markets.

The market of life insurance is the exception. Nearly half of it belongs to the Insurance Company “INTO.” The share of other insurance companies in the market is insignificant (up to 10%). This is explained by the fact in accordance with the Law of Ukraine On Insurance, that was adopted in 1996, life insurance is defined as the exclusive type of insurance services, in other words companies which are engaged in life insurance have no right to be engaged in other types of insurance.

The Committee pays close attention to the markets of compulsory insurance because those types of insurance have such special links with some specialized branches (atomic electric power industry, transportation, etc.) that make it possible for enterprises, which have the support of managing bodies of the relevant branches, to establish captive insurance companies for specific types of insurance services. This results in restriction of competition and, in some cases, in monopolization of certain types of insurance. The market of compulsory personal insurance of passengers against accidents at transport is significant in this respect.

In many cases, in the course of carrying compulsory types of insurance, persons who pay insurance fees are deprived of the possibility to choose acceptable conditions of contracts for insurance and, as a result, the possibility to have an impact on the level of prices for those services. Instead, insurers and insurance agents who act in the interests of the insurer for commission (especially those who occupy monopoly position on other markets, first of all on the markets of natural monopolies) are interested in the absence of competition or in its significant restriction, in increased receipts resulted from it, and in setting the maximum possible insurance tariffs. In this connection the need to introduce requirements that the mentioned entrepreneurs should conclude contracts for the relevant compulsory types of insurance with insurers exclusively on a competitive basic has matured.

Ex. 1. Read and translate the text.

Ex. 2. Answer the following questions:

1. What kind of tendency is observed during the recent years in the sphere of insurance services in Ukraine?

2. What was the decrease in number of participants in the insurance market associated with?

3. Which are the basic segments of the insurance market?

4. Why is not the market of life insurance so highly competitive?

5. Why are insurers and insurance agents interested in the absence of competition or in its significant restriction, in increased receipts resulted from it, and in setting the maximum possible insurance tariffs?

Ex. 3. Read the following false statements and correct them:

1. The market of insurance services in Ukraine doesn’t undergo any development.

2. The insurance market of Ukraine is on whole of a monopolistic nature with no competitiveness at all.

3. The market of life insurance in Ukraine is of an oligopolic nature.

4. Compulsory insurance has no links with some specialized branches of industries.

5. There is no need for entrepreneurs to conclude contacts for the relevant compulsory types of insurance with insurers exclusively on a competitive basis.

Ex. 4. Translate the text into Ukrainian:

For the time being, compulsory personal insurance of passengers against accidents at transport is carried in accordance with the Resolution of the Cabinet of Ministers of Ukraine of August 14, 1996 No. 959 On the Approval of the Statute of Compulsory Personal Insurance Against Accidents at Transport. The fact that final consumer of insurance services, i.e. the passenger, is deprived of the possibility to choose an insurer independently is a peculiarity of that sort of insurance which should be considered as a separate market of insurance services. The mentioned resolution defines that insurance is carried by such an insurance company that concluded the relevant contract with a transport organization. Thus the transport organization has the possibility to choose an insurer independently, according to its priorities, for the purpose of insuring passengers who use services of the organization.

As practice shows, transport organizations use that possibility. For example, as a result of actions performed by entrepreneurs that occupy monopoly position on the markets of transportation, owing to active “support” given by the Ministry of Transport of Ukraine, the market of insurance services associated with compulsory personal insurance of passengers against accidents at transport turned to be distributed among several insurers. That sort of insurance in the sphere of motor transport is carried nearly completely by the Ukrainian Insurance Company “Garant-Avto,” in the sphere of railroad transport – by the Insurance Companies “Inter-Polis” and “Disko.”

UNIT 33